TLC may get grant to stay open until March

BUFFALO – TLC Health Network, parent company of Lake Shore Health Care Center, may receive a grant that could keep the hospital open into 2015.

It was announced at TLC’s bankruptcy hearing in Buffalo Monday, the hospital has been preliminarily approved for a nearly $7 million grant from the state Department of Health’s Interim Access Assurance Fund.

TLC’s attorney Jeff Dove said the purpose of IAAF is to provide interim funding to critical, safety net hospitals so they can participate in the Delivery System Reform Incentive Payment program, which promotes cooperation. He continued, the amount of the loan is dependent on the hospital’s need, where an amount is disbursed each month based on what was spent on operations the previous month.

He explained this funding could give the hospital time to make a sale, sell some assets like land, or for a more traditional restructuring and partnership agreements.

Dove explained, in order to go forward with the process of obtaining the grant, the TLC must “disestablish” its relationship with Lake Erie Regional Health System of New York.

Last week, LERHSNY’s board of directors took the first step in the process of withdrawing as the parent company. This would leave TLC as the sole operator of Lake Shore with an independent board of directors.

Dove asked Chief Judge Carl L. Bucki to further the process by signing on to the certificate of need to be sent to the department of health. Dove said if the certificate of need was sent out Monday, it goes to DOH counsel and then to a committee with the expected date of disestablishment to be Aug. 7.

Dove said as long as this process moves forward, then TLC is eligible for around $7 million in grant funding, which would keep Lake Shore open through March 2015.

The grant has specific uses attached, according to Dove, where the money can only be used for operations, not to repay debts.

“The money cannot be used to pay debts or for capital projects. There are concerns that the money will go to secured creditors,” he said. “They are concerned once the money enters the account, it will be subject to liens and encumbrances.”

Brooks Memorial Hospital is a secured creditor for TLC and has a cash collateral agreement with them, which guarantees its loan will be repaid through TLC’s assets.

Because of this agreement, Dove submitted an order for Judge Bucki’s consideration to approve going forward with the grant with the language that the money will be “free from liens … and encumbrances.”

Brook’s Attorney James Thoman, submitted a similar order omitting that language and stating Brooks “reserves the right on protection of payments.”

Dove said that is exactly what the DOH is concerned about and if his version of the order was not approved, TLC would not get the grant.

Creditors Committee Attorney Steve Donato said the committee was given the same impression from DOH and supported TLC acquiring the grant.

UPMC Attorney David Salzman said his client did not have a position and trusted the court to make the appropriate decision.

Dove argued that the grant money can be traced through the hospital’s regular accounting process.

Judge Bucki said he was concerned with grant funds and receivables “co-mingling” and after reading a previous order, which entitled Brooks to all TLC’s assets to get its repayment, he suggested grant money be placed in a separate account.

Thoman said he believed a solution could be worked out.

Bucki decided to approve Dove’s order in the interim with the condition of a separate account, but invited the attorneys to negotiate a better solution and submit it to him for approval.

Dove said this must be approved in the next couple days.

Bucki also adjourned an order for funding from the Dormitory Authority of the state of New York until July 7, on Dove’s recommendation.

Dove explained TLC may not need the DASNY loan at all if it receives the IAAF grant.

The next hearing will be July 7 at 1 p.m.